EUR/USD: Imminent crossing of moving averages

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Barometer of risk appetite, the Euro confirmed, without going, its passage below its 50-day moving average against the Dollar, against the backdrop of the resurgence of concerns about the American banking sector, tangible signs of a economic slowdown in China, and a sudden loss of speed in the German economy, the largest in the Euro Zone.

EuroStat has just published some interesting benchmarks this morning, in particular the volume of industrial production which significantly beat expectations (+0.5%) in June, and the very first estimates of GDP (+0.3% in Q2 compared to the previous quarter). Note, however, after Germany, the entry of the Netherlands into recession.

Published on Monday, Chinese industrial production will have increased over one year “only” by 3.7%, against a target – the consensus – at +4.3%. Clear disappointment also on retail sales, up 2.5% over one year, well off a target of +4.2%. The situation in China is so worrying that the Central Bank surprised the markets by lowering its key rates to loosen the monetary rope and support economic activity.

“Faced with the growing risk of an economic double dip and the lukewarm reaction from Beijing so far, [les stratégistes de Nomura] scaled down [leurs] GDP growth and inflation forecasts. Markets may underestimate the negative impact of the property fallout and heightened geopolitical tensions.”

As for the American statistics on Tuesday, they are pleasantly surprising on consumption, which, it should be remembered, remains the main engine of growth across the Atlantic. Retail sales across the Atlantic rose 1% in July, excluding automobiles, where investors saw a much more contained rise.

To follow this Wednesday across the Atlantic, housing starts and building permits at 2:30 p.m., the federal report on industry at 3:15 p.m. and the Fed Minutes at 8:00 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0920 approximately.

KEY GRAPHIC ELEMENTS

The near total retracement of July’s gains does not militate at this stage for a continuation of the advance of the currency pair, without formally ruling it out. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. Immediate neutral opinion. Forex traders will therefore avoid taking a position in the next few hours on the currency pair, waiting for a directional entry. The bearish message would nevertheless take shape in the event of an imminent break in the 50-day moving average by its 20-day counterpart (in dark blue) at a significant angle.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0854 USD and the resistance at 1.1100 USD.

CHART IN DAILY DATA